Outsourcing HR can increase costs

16 November 2005
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16 November 2005 | Rebecca Ellinor

Too many companies are outsourcing HR functions for the wrong reasons and these decisions are proving costly, according to a new study.

Research conducted by The Hackett Group showed the more an average company spent on outsourcing the greater total HR cost per employee.

It found the best firms spend 25 per cent less than their peers on HR and rely on 16 per cent fewer HR staff. Typical companies, the research revealed, make everyday errors, such as neglecting to streamline processes beforehand and retaining staff responsible for the outsourced function.

Patty Miller, Hackett senior business adviser, said: "Typical companies often outsource for the wrong reasons, in an attempt to lower costs and fix processes they know are broken.

"They frequently haven't standardised and simplified their operations, and the resulting complexity drives increased outsourcing costs."

Stephen Joyce, Hackett HR practice leader, said in contrast the top organisations take a very different approach to outsourcing, making decisions based on cost, strategic value and risk.

As a result, Hackett found these organisations achieve better results. They have less complex, more streamlined processes that allow them to fill positions faster, see lower voluntary redundancy rates, and demonstrate greater alignment with their company's business goals.

* For more information go to: www.thehackettgroup.com

SMnov2005

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